Dubai: Private sector salaries in the UAE rose by 10.7 per cent on average over the last year, just beating the nine per cent GCC average, according to figures released yesterday by online recruitment firm GulfTalent.com.

Oman registered the biggest jump, from 5.6 per cent last year to 11 per cent this year, while wages in Saudi Arabia climbed just 7.7 per cent – the lowest of the countries surveyed.

Analysts say employers have been forced to raise wages to contend with intense competition for talented workers, healthy pay rises in the public sector, the depreciating US dollar and rising salaries in India, traditionally the main supplier of expatriate workforce to Gulf countries.

But better pay is unlikely to leave more money in the bank for workers due to spiraling inflation and depreciation of dollar-pegged currencies.

The UAE’s official inflation reached 9.3 per cent in 2006, driven by soaring food prices and rent hikes, while Qatar’s inflation increased to 14.8 per cent year-on-year in the first quarter before declining to 12.8 per cent in the second quarter. Shortage of skills

Of the UAE-based expatriates surveyed by GulfTalent.com, 41 per cent reported making no savings on their income, the highest figure in the Gulf. And nine per cent of UAE-based expats reported that their salaries did not even cover their living costs, forcing them to borrow or live off their existing savings.

For employers the trend translates into difficulty recruiting and retaining staff, which has already had serious implications for the region’s economy.

“While market demand was extremely healthy, skills shortages were limiting their companies’ ability to grow, forcing them to turn down new business or, in some cases, causing them to miss targets on their existing projects,” said Yasser Hatami, managing director of GulfTalent.com.

Abid Junaid, CEO of Dubai-based property developer ETA Star, said developers are becoming more realistic in the number of projects they launch and their delivery targets due to a lack of skilled labour among contractors, but he did not anticipate a major slowdown in the construction sector.

“It’s a very concerning situation as it impacts our ability to attract expatriate workers, especially from Europe and the Indian sub-continent,” he said.

Junaid said developers can reduce residents’ expenditure on rent by building more low-cost housing.

According to the GulfTalent survey, the GCC construction sectors enjoying the highest pay rise, along with banking and energy. Healthcare and education registered the lowest increases.

Among job categories, engineers and finance staff received the biggest pay rises, followed by human resource professionals in third place, the survey revealed.

“Historically under-represented in the region, the HR function has recently been catapulted to the front line as Gulf-based employers grapple with the challenge of attracting, developing and retaining staff,” the report stated.

In response to declining net disposable income, companies are now changing the structure of worker’s pay packages to boost staff retention, said Hatami. Pensions, stock options, training initiatives, and a reduction in working hours are all being considered, he said.

The quality of life within a country is another important factor, the survey suggested. It revealed that the UAE, and Dubai in particular, still benefit from the relative popularity of the country with expatriates, thanks to attractive career opportunities, modern infrastructure and facilities, and a relatively liberal society.

“This is allowing UAE-based employers to continue to attract and retain professionals with below-inflation pay rises, albeit with greater difficulty than previously,” the report said.